A board of directors can guide strategic direction, governance and ensure long-term success.
However, many small business owners don’t realize that these boards can be as helpful for a private company as they are for a large corporation. Here’s what you need to know about assembling your private company board of directors.
What does a board do in a private company?
A private company board of directors directs a company on a fiscal or strategic level. The board comprises experts in the company’s industry, business, and leadership fields.
Some business leaders might balk at ceding any control to a board of third parties, but plenty of benefits can outweigh the risks.
A board of directors will bring various skills to the table that you won’t be able to master on your own. They provide a valuable outside perspective that can help you clarify your business. A private company board of directors also puts clients and employees at ease by providing a layer of guidance and support that your business wouldn’t otherwise have. The board’s primary responsibility is governance and not day-to-day decision-making.
The board has voting power or say in the company’s decision-making process, although whether their input is binding depends on the type of arrangement your company has. An advisory board, for example, is less formal, while a fiduciary board comprises shareholders who usually appoint their representatives and have veto power.
Private Company Board of Directors Best Practices
If you’re assembling a board of directors for your company, here are some crucial steps to consider.
- Be clear about your needs. Before you start building your small business board of directors, it’s essential to determine the purpose and goals of the board. What specific challenges or opportunities is your company facing? Are you looking for board members who can provide financial expertise, industry knowledge, strategic guidance, or all of the above?
- Recruit a diverse group. Once you have a clear understanding of the purpose and goals of your board, you can start identifying potential board members who can help you achieve those goals. Include individuals with diverse backgrounds and perspectives with skills you know you lack. Avoid creating an echo chamber. A board of “group thinkers” is ultimately detrimental.
- Establish clear roles and expectations. It’s essential to create clear responsibilities that each member will agree to when they accept your invitation to join the board. This includes defining the specific duties of the board as a whole, as well as the roles of individual members.
Once your board has been established, please don’t leave it on autopilot. Instead, regularly evaluate the contributions of your board members to ensure that your company is benefitting. Periodic reviews, such as quarterly or annual reviews, will allow you to change direction.
Ultimately, the right board of directors can be invaluable for your company. By assembling valuable members with a clear vision, you can hear new perspectives and learn from other highly qualified leaders in your field.
I offer small business coaching services that can help you learn more about making the most of your board of directors for small businesses. Click here to schedule a free video call, and let’s chat about how to assemble your own effective private company board of directors.